Post by Dunja Cupar

The same SaaS companies can pass or fail the Rule of 40 depending on how you count one line: stock-based compensation. On an EBITDA basis, 15% of public SaaS clear the bar. On a free cash flow basis, 46% do. (Aventis Advisors, 55 companies, May 2026.) Same businesses. Same quarter. The pass rate triples. Rule of 40 gets quoted like a verdict: growth plus margin over 40 and you're healthy. But margin is doing a lot of quiet work in that sentence. Heavy equity compensation barely touches cash flow and hammers EBITDA. So a company that looks unhealthy on one basis looks fine on the other, with nothing about the business itself having changed. The metric still matters. It just carries less on its own than people assume, so the first question worth asking is which version you're looking at. If you're raising, run both. The investor across the table already is. #SaaS #RuleOf40 #UnitEconomics #VentureCapital #Startups